Can I use my super to buy a house?

Saving up for a home loan deposit can be stressful, especially if you’re juggling household expenses and other debts. The good news is that many first homebuyers can utilise voluntary super contributions towards their deposit.

The First Home Super Saver (FHSS) scheme allows Australians over the age of 18 to make or arrange super contributions they can use as a deposit to purchase their first home. These funds are considered genuine savings.

What do I need to know before accessing super for a home loan deposit?

If you’re thinking about using super for a house deposit, the Australian Taxation Office’s (ATO’s) FHSS scheme allows eligible individuals to withdraw up to $50,000 in voluntary contributions. Couples pooling their funds may be able to access up to a combined $100,000 to help cover the cost of their deposit.

First home buyers may only withdraw up to 40% of their total superannuation, preventing them from completely draining their retirement nest egg. It’s important to remember that withdrawing super early reduces the benefits available to you when you retire. 

The super you can access through the FHSS scheme is limited to voluntary non-concessional contributions you’ve made. You cannot withdraw any contributions made on your behalf by your spouse or employer, although you can access concessional salary sacrifice super contributions.

The scheme is exclusively available to eligible applicants who are buying their first home where they plan to live, not for investment properties or other purchases. You can use this scheme if you are a first home buyer and all of the following apply:

• You have not previously owned a property in Australia
• You are an Australian citizen over 18 years of age
• You have not have previously had funds released from your superannuation under this scheme
• You will occupy the premises you buy, or intend to as soon as practicable
• You will occupy the property for at least six months within the first 12 months you own it

If you apply for the FHSS scheme, you can withdraw super for a house deposit when you are ready to enter the housing market. You don’t need to have found your home yet, but you will need to sign a contract to buy a home within 24 months of your release request. This timeframe includes a 12-month extension being granted by the ATO.

You can make your release request within 14 days of signing a property contract, but you’ll need to receive an FHSS determination from the ATO beforehand. Consider checking the FHSS scheme rules thoroughly before making an application and perhaps discuss your options with an accountant or financial advisor.

Withdrawals are generally taxed at your marginal tax rate, less a 30% offset. The ATO will arrange for money to be released from your super and pay it on to you. They will withhold an estimate of the tax owed on this amount.

How much super can I withdraw for a home loan deposit?

According to the ATO, the median super balance in the 2021-2022 financial year for men aged 30-34 was $39,796, and for women was $34,327. This means that, on average, these men could potentially be dipping into their retirement funds for an extra $15,918 towards a home deposit, while women would be able to withdraw up to $13,731.

Source: ATO Taxation Statistics

Those eligible for the scheme can apply to have a maximum of $15,000 in voluntary contributions from any one financial year released. You can access up to a total of $50,000 worth of contributions across all years. You’ll also receive an amount of earnings (interest) that relate to these contributions.

These earnings will benefit from the shortfall interest charge, which was 7.36% in the July – September 2024 quarter. This deemed earnings rate is generally higher than typical deposit rates on offer from financial institutions.

Be aware that, even including the interest earned, the total amount you receive may not be enough to fully cover a home loan deposit.

For example, if you’re applying for a home loan to buy a property worth $800,000, the lender may ask you to pay a 20% deposit. This means you’d need $160,000. $50,000 would cover less than one-third of this amount. Even if the lender only required a 10% deposit, you’d be $30,000 short, which would mean you’d need to come up with the difference and potentially factor in Lender’s Mortgage Insurance (LMI) costs.

You may need to choose between owning a home sooner and retiring with a lower income. You may want to check if you can access other finance sources before applying for a super withdrawal.

Individuals can only request a release under the FHSS scheme once. It may take between 15 and 20 business days for funds to be deposited into your account so consider this timing when you start your home buying activities.

It might also be worthwhile contacting a financial advisor and calculating the impact of accessing super for a house deposit on your eventual retirement income. While $50,000 may not appear significant enough for a home loan deposit today, the projected earnings on that amount over your working life can be substantial. For example, during the COVID-19 pandemic, it was briefly possible to withdraw up to $20,000 from your superannuation account. RateCity research found that a 30-year old who took up this option at the time could be over $43,000 worse off at retirement.

What if I withdraw funds but don’t buy a home?

If you don’t sign a contract to buy a home, you may either recontribute the released amount back into superannuation within the 24-month time limit, or pay a tax equal to 20% of the concessional amount released. This removes the tax benefit you received using the scheme.

Compare home loans in Australia